In 2020, I sold most of my stock portfolio because I was convinced the pandemic would crash the market for years. I moved everything to cash in March, patted myself on the back for being smart, and waited for the bottom.
The bottom came about two weeks later. And then the market ripped higher so fast I could not believe what I was watching. By the time I felt “safe” enough to reinvest, the S&P 500 had recovered almost everything. I bought back in at prices only slightly below where I had sold. After accounting for the trades, taxes on realized gains, and the dividends I missed, my brilliant market-timing move cost me roughly $23,000.
That was the last time I tried to be clever with my investments. Here is why timing the market does not work, what works instead, and how I finally made peace with doing the boring thing.
The Math That Changed My Mind
There is a study that is often cited in investment circles, and for good reason. JPMorgan’s Guide to the Markets analysis shows that if you invested $10,000 in the S&P 500 at the beginning of 2003 and stayed fully invested for 20 years, your money would have grown to roughly $64,844 by the end of 2022.
If you missed just the ten best trading days during that period — ten days out of more than 5,000 — your ending balance would have been about $29,708. Less than half. And if you missed the 20 best days, you would have ended with about $17,826. Miss the 30 best days, and you barely broke even with inflation.
The kicker: many of the best days happened immediately after the worst days. The market’s biggest gains tend to follow its biggest drops, often within 24 to 48 hours. To time the market successfully, you need to not only sell before the crash but also buy back before the recovery — and the recovery often starts before anyone realizes the crash is over.
I was not able to do that. Almost nobody is.
Why We Think We Can Do It Anyway
Market timing feels intuitive. The news is bad, stocks are dropping, and every instinct tells you to protect your money. The urge to sell during a downturn is primal — it is the financial equivalent of running from a predator. And human brains are wired to find patterns, which means we constantly see signals in market data that we interpret as predictive.
But markets are not predictable in the short term. They are influenced by millions of participants, algorithmic trading, geopolitical events, and psychological dynamics that interact in ways no individual can model. Even professional fund managers — people with teams of analysts, proprietary data, and decades of experience — fail to beat the market consistently.
Over a 15-year period, roughly 90 percent of actively managed large-cap funds underperform the S&P 500 index. These are not amateurs — these are the best-resourced investment professionals in the world. If they cannot time the market or consistently pick winners, then believing that I can do it with a brokerage app and some news articles is not confidence. It is a delusion.
What Actually Works: Systematic Investing
The strategy that has generated real wealth for me is embarrassingly simple. Every month, on the same day, the same dollar amount is automatically transferred from my checking account to my investment accounts. It buys the same index funds regardless of whether the market is up, down, or sideways.
This is dollar-cost averaging, and its power lies in what it removes from the equation: my judgment. When the market is high, my fixed contribution buys fewer shares. When the market is low, the same contribution buys more shares. Over time, this results in a lower average cost per share than trying to pick the right moments to invest.
More importantly, it keeps me invested. The biggest risk to long-term returns is not a market crash — it is being out of the market when it recovers. By investing automatically, I am always in. I do not have to decide when to buy. I do not have to overcome the fear that grips me during sell-offs. The system handles it.
My portfolio is intentionally boring: a total U.S. stock market index fund, a total international stock market index fund, and a bond index fund. The allocation is roughly 70/20/10. I rebalance once a year, usually in January. The whole process takes about 30 minutes per year.
The Emotional Discipline Nobody Talks About
The hardest part of systematic investing is not the strategy — it is sitting still when everything inside you screams to act. During the 2022 bear market, my portfolio dropped about 22 percent. On paper, I lost roughly $55,000 in value. Every financial news headline told me things were getting worse. Friends were moving to cash. Social media was full of doomsday predictions.
I did nothing. I continued my automatic contributions. I did not check my portfolio more than once a month. I did not sell a single share.
By mid-2023, the portfolio had recovered and then some. The shares I bought during the downturn — at lower prices — were some of my best-performing purchases. But I did not buy them because I was smart enough to spot the bottom. I bought them because my automated system kept investing regardless of my feelings.
This kind of discipline is not natural. It requires building systems that work without willpower and then getting out of the way. Building wealth consistently depends far more on behavior than on brilliance.
The Cost of Emotional Decisions
Dalbar, a financial research firm, has tracked the behavior of mutual fund investors for decades. Their findings are consistent and depressing: the average equity fund investor significantly underperforms the funds they invest in. The reason is timing — investors buy after prices have risen (driven by greed) and sell after prices have fallen (driven by fear). They consistently buy high and sell low.
Over a 30-year period ending in 2022, the S&P 500 returned about 9.65 percent annually. The average equity fund investor earned about 6.81 percent annually. That nearly three-percentage-point gap, compounded over decades, translates to hundreds of thousands of dollars in lost wealth for a typical investor.
The gap is not caused by bad fund selection or high fees — it is caused by behavior. By trying to time entries and exits, average investors systematically destroy their own returns. The solution is not to become smarter about timing — it is to stop trying.
What About Obvious Crashes?
People always ask: “But what about a truly obvious crash — like 2008? Shouldn’t I sell then?” The answer is still no, with one caveat.
If you are within five years of retirement and heavily invested in stocks, a major crash can seriously undermine your financial plan because you do not have time to recover. In that situation, the answer is not to time the market but to have adjusted your asset allocation beforehand — shifting toward bonds and stable assets as retirement approaches so that a crash does not derail your withdrawal plan.
For everyone else — people with ten, twenty, thirty years until they need the money — a market crash is not a threat. It is an opportunity. Lower prices mean your contributions buy more shares, so your future returns are higher. The worst thing you can do during a crash is sell, locking in your losses permanently.
I keep a printed note on my desk that says: “You are not smarter than the market. Stay invested.” During the next downturn — and there will always be a next downturn — I plan to read it, take a breath, and do nothing.
Getting Started If You Have Been on the Sidelines
If you have been sitting on cash waiting for the “right time” to invest, understand that extensive research shows that investing a lump sum immediately outperforms waiting in about two-thirds of historical scenarios. The market goes up more often than it goes down, which means every day you wait is statistically more likely to cost you money than save you money.
If that feels too aggressive, use dollar-cost averaging to ease in. Split your available cash into 12 equal parts and invest 1 part each month for a year. You will not capture the absolute best entry point, but you also will not capture the worst, and you will be fully invested within twelve months.
Open a brokerage account at a low-cost provider — Investor.gov’s getting-started guide walks through the basics. Choose a broad index fund. Set up automatic contributions. Then close the app and go live your life. Your money will take care of itself if you let it.
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